Both parallels and vmware only work on intel powered macs (not the powerpc powered ones).

Don't forget you need a license of Windows too (at least you'll need one that you're allowed to use on new hardware and still can activate (e.g. not an OEM license). I'm not sure you can even buy a new copy of XP anymore. Windows is going to cost you far more than the virtual machine software.

Alternatively an intel mac can also boot windows in a dual boot configuration. Apple calls this "boot camp". Boot Camp is included with Leopard (think of it as an easy interface and a set of drivers for Apple's hardware) still you'll need that windows license.

A few years back, Microsoft used to sell Virtual PC for powerpc based macs with a licensed copy of XP bundled with it.

I've never tried VMware Fusion, but in my experience, if you can afford Parallels, get it! It's great, especially in its "coherance" mode, which makes the Windows desktop go away, and lets you just run Windows windows right on top of your OS X desktop, as if they were Mac apps. The windows minimize to the dock and everything!

We are a mixed environments company. Our POS stations are all PCs, but all of our back office systems are Macs. We run Microsoft RMS management tools on the Macs. We started with Paralles, but then after testing VMware moved to it. Hands down VMware was a much better experience.

vmware works great on my imac, apart from sim city crashing it every now and then. for all web dev stuff its great. its pretty amazing having both OS's on one screen each and really boosts productivity (as macs do in general)

the guy in the mac store in miami told me their customers report better results with vmware than with parallels.

A technology with the user-unfriendly name of virtualization provides a much better answer (than Boot Camp). New versions of two very good products, Parallels Desktop for Macintosh 4.0 and VMware Fusion 2.0 (both $80), let you run Windows programs on a Mac so that they look almost exactly like OS X programs and behave that way, too.

There are quite a few 'P versus VM' speed comparisons around on the web, but I suspect that I can't link to them here. I referred to a few of them when I made a buying decision and they proved quite useful.